Big Changes in Health Coverage Coming

Don’t count on employers to stop offering health benefits altogether, but do count on big changes in how they offer the benefits.

That’s the main finding from recent analysis by Aon Hewitt. The vast majority of large and mid-size U.S. employers — 94% — say they’ll continue to offer health benefits to their employees in the next three to five years, but almost two-thirds plan to move away from a traditional “managed trend” approach to one that requires participants to take a more active role in their health care planning.

The consulting firm surveyed nearly 800 large and mid-size U.S. employers covering more than 7 million employees.

“The health care marketplace is becoming increasingly complex,” said John Zern, executive vice president for Aon Hewitt. “New models of delivery, new approaches to managing health and new compliance requirements are challenging employers to think differently about their role in owning health insurance responsibilities for employees and their dependents.”

Aon Hewitt said the amount employers spend on health care has increased by 40% in the past six years to approximately $8,800 per employee. Meanwhile, employee premium and out-of-pocket costs have increased 64% to almost $5,000 per year. Aon Hewitt estimates that health care costs for both employers and employees will continue to rise 8% to 9% per year for the foreseeable future.

Zern said though employers are staying in the health benefits game, they are taking “bold and assertive steps to achieve more effective results” — and they are doing so at a faster pace than has been seen in previous years.

Almost 40% of employers expect to migrate toward a “house money/house rules” approach in the next three to five years. For example, participants who take health risk questionnaires and biometric screenings may be rewarded in the form of lower premiums or access to broader health coverage.

Other employers may waive prescription drug co-pays if an employee demonstrates they are following their doctor’s orders with regard to a chronic condition. Lastly, some leading-edge employers are working with health plans to incentivize participants to use a small provider network of high quality, cost-efficient providers, Aon Hewitt finds.

Though just 6% of employers plan to exit health care completely in the next three to five years, 28% say they’re planning to move to a private health care exchange.

Jim Winkler, chief innovation office the U.S. Health & Benefits practice at Aon Hewitt, said that private exchanges are an “increasingly attractive option” to organizations that want to offer employees health care choice while lowering future cost trends and lessening the administrative burden associated with sponsoring a health plan.

“The allure of exiting completely is strong until you look at the numbers,” Winkler said. “Between the Affordable Care Act penalties for failing to offer coverage and the ensuing talent flight risk, most employers believe they need to continue to play a role in employee health, but want a different and better outcome.”